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Inflation Differentials and Business Cycle Fluctuations in the European Monetary Union

  • Christian Proaño Acosta


    (IMK at the Hans Boeckler Foundation, University of Bielefeld)

The high degree of persistence in the national inflation differentials of the majority of EMU Member States observed since the introduction of the euro has raised serious concerns among researchers and policy-makers alike. In this paper the main theoretical arguments which explain the existence of such inflation differentials within a monetary union are reviewed and, by means of econometric methods, their dynamic behaviour prior and after the introduction of the euro is analyzed. Furthermore, the empirical evidence for different degrees of correlation between the country-specific business cycles fluctuations and the arise of national inflation differentials with respect to the euro area average are investigated through single-equation GMM and panel TSLS estimations.

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Paper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 05-2007.

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Length: 46 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:imk:wpaper:05-2007
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